Purgatory of the Working Poor

Since making the leap from welfare to work two years ago, Tami Buddi has put a lot of miles on her aging family sedan. To collect child-support payments from her former boyfriend, she drove to the county courthouse in a nearby suburb of Minneapolis. To keep appointments with her job counselor, she drove to a second county office. To apply for subsidized health insurance, she drove to a third site, clutching a thick application and a sheaf of payroll stubs. No one told her about federal training grants, so she found a night school on her own, which meant more time behind the wheel every week. All this while working full time as a bill collector and raising a 10-year-old daughter by herself.

“It's like they sat down and tried to make it complicated,” she says with a cynical chuckle.

Like some 30 million other low-wage Americans, Buddi finds herself in a sort of purgatory of the working poor. In the last decade, Congress has decreed that most adults must work if they want access to the federal safety net, and lawmakers have poured billions of dollars into “work supports” such as child-care subsidies and employment tax credits. Yet no one in Washington seemed to think about assembling these services into a coherent package that would be accessible and convenient to struggling workers like Tami Buddi.

“No public agency really has the working poor as its mandate,” says Frieda Molina of MDRC, a New York–based research organization that is studying career advancement among low-wage workers. Instead, work supports are scattered across a bewildering landscape of federal agencies and local offices. “The pluralism of domestic policy has produced the siloization of human services,” writes Richard Nathan, director of the Rockefeller Institute of Government at the State University of New York. “The losers are citizens who have such a hard time dealing with government.”

This fragmentation helps explain why millions of poor Americans never receive the benefits that Congress created for them, benefits that were supposed to express society's support for the ideal of work. Economists estimate that about 80 percent of eligible workers collect the Earned Income Tax Credit (EITC), a refundable credit for the working poor. But only 51 percent of eligible adults receive Medicaid, and only 41 percent collect food stamps. An even smaller fraction receives child-care subsidies. And -- maybe most troubling for its long-term implications -- only about 200,000 adults receive job training in a typical year through the main federal workforce statute, even though perhaps

20 million low-wage workers are struggling along with a high-school diploma or less.

In the past, a local welfare office was the main portal to government benefits such as Medicaid and food stamps. But, since 1996, when Congress passed a landmark overhaul of public assistance and made welfare contingent on work, the number of families applying for cash support has plummeted. The number of working poor has risen sharply, meanwhile, but these adults are mostly disconnected from social services.

One result is that federal income supports reach far fewer families today than they did a decade ago. The number of low-income children served by the EITC grew by 5 million between 1991 and 2002, according to Wendell Primus, minority staff director at the Joint Economic Committee of Congress. But the number served by other strands of the federal safety net -- cash welfare, food stamps, unemployment benefits, and housing subsidies -- dropped by 11 million.

This might represent progress if the number in need had fallen as well, but it has not. Between 1991 and 2002, the national poverty rate fell slightly, from 14.2 percent to 12.1 percent, but the total number of Americans living in poverty remained nearly the same at roughly 35 million.

Here and there around the country, a handful of states and counties anticipated the problem of fragmentation and adopted novel strategies to address it. They represent what should be considered the next stage of welfare reform: fulfilling the promise to make work pay.

One of the most admired examples is the Montgomery County Job Center in Dayton, Ohio. The center occupies a remodeled warehouse near downtown Dayton, a vast gray structure with eight acres under one roof. It offers a human-services megamall providing a job bank, cash welfare, food stamps, health insurance, child-care subsidies, legal aid, housing assistance, career counseling, mental-health services, and access to additional supports provided by dozens of community nonprofit agencies.

Quite beyond creating one-stop convenience, Montgomery County designed this facility with the goal of reducing the intimidation and stigma associated with traditional welfare offices. Clients enter through a pleasant, tiled lobby where a receptionist hands out color-coded cards that guide them to the right department -- yellow for child care, for example, or blue for housing. A client who simply wants to find work can step directly to a bank of computers retrofitted with the nation's top-rated employment database. A really troubled family can see a team of job counselors, eligibility experts, and social workers. The center is on a major bus line and, because many of its clients already hold jobs, stays open until 6:30 p.m. on Tuesdays and Wednesdays.

People who might never walk into a welfare office seem quite willing to use the Dayton center. In the parking lot, snappy new Mustangs and VWs sit side by side with rusting Chevies and minvans; less than 20 percent of the center's “customers” receive cash assistance. Although the center emphasizes job hunting and service to local employers, the staff is cross-trained to administer health insurance, housing subsidies, and other services.

“Do you want to know why people don't keep a job?” asks Dannetta Graves, director of the county's Department of Job and Family Services. “It's because the support system failed them. They lose a transmission and they can't get to work. Their baby-sitter cancels on them. Their children get sick. What we give them is a backup system.”

Assembling that system should be the responsibility of a trained caseworker, not one more chore for some overworked, overwhelmed single parent, according to Graves and her staff. “The customer who sits down at our table should not have to figure out which funding stream she is eligible for,” says Linda Shepard, the department's assistant director. “It's our job to customize a package of services for her.”

Graves' operation hasn't solved every problem that faces the working poor. But the average client lands a job paying $9 to $10 per hour, which makes that client better off than the typical adult leaving welfare. Add the federal EITC and child-care subsidies and that client's effective income could rise from $15,000 to $25,000, even if he or she is working just 30 hours a week. In addition, the center is working with local hospitals to build job ladders for unskilled workers who want careers in health care.

Bricks and mortar, however, isn't the only way to remodel the work-support system. In Utah, the Legislature merged its state employment agency with its human-services department, then created a single application for welfare, food stamps, Medicaid, and child-care subsidies. In Arkansas, welfare caseworkers can reference the computers that house food-stamps and Medicaid data; a family applying for one benefit can enroll in others without supplying additional paperwork. Louisiana can automatically grant or renew Medicaid coverage using a family's food-stamps application. The strategy saves time for government caseworkers and reduces the large number of families who wash out of Medicaid each year for purely procedural reasons.

In Rocky Mount, North Carolina, a nonprofit agency called Connectinc. aims to combine the convenience of telephone service with an ambition to place clients in jobs paying $12 to $14 per hour. Parents confronting the hazards that derail so many of the working poor -- a sick child or an eviction notice, for example -- can call a central switchboard for referrals to crisis day care, medical clinics, or housing agencies. Those who want to climb a rung on the job ladder can find a career counselor, the right community college, or a federal tuition grant.

In an era when many politicians want to shut the door to the welfare office, why make public benefits more accessible?

One answer is that work supports help poor adults stay in the job market. Officials in Hennepin County, a large urban jurisdiction in Minnesota, studied low-income residents last year and found that dozens who lost eligibility for child-care subsidies quit their jobs and applied for welfare because they couldn't afford their day-care bills. Similarly, economists have found that the EITC promotes and sustains employment among workers who couldn't support a family on market wages alone.

More importantly, research shows that children fare better when their families have the basic elements of material security. High-quality child care, for example, has been linked to better school readiness and cognitive development. Children with medical insurance are more likely to see a doctor regularly and receive preventive health care. Welfare-to-work studies by MDRC suggest that children perform better in school and have fewer behavioral problems when household income rises above the poverty line. If the goal is to lift America's next generation out of poverty, work supports for the present generation of struggling parents are vital.

What would a model work-support system look like? Sharon Parrott, director of the welfare-reform and income-support division at the Center on Budget and Policy Priorities, says it would have three components: convenient one-stop service centers; streamlined application forms; and generous income ceilings so that a working parent doesn't lose eligibility for, say, health insurance the minute he or she climbs above the poverty line. Scholars who have studied “service integration” in the various states say that no one place has put all three together, though a handful of counties in states such as California and Oregon have come close.

With the Workforce Investment Act of 1998, Congress ordered states to create one-stop centers where a jobless resident or a worker seeking a skills upgrade could find a full range of employment services. But few states have taken the next step, which is to integrate one-stop employment centers with social services that sustain the working poor. For one thing, it's laborious and expensive to merge agencies, reprogram computers, and cross-train caseworkers. For another, it's hard to create the crisp, upbeat mood of an employment agency -- attractive to employers and middle-income workers -- while still serving clients who walk in the door suffering from mental illness or domestic violence.

Indeed, the one-stop ideal remains rare. Researchers from the Center for Law and Social Policy in Washington, D.C., surveyed 30 one-stops in several states last year. They found that only six provided a high level of access to work supports such as the EITC, subsidized child care, food stamps, and transportation assistance.

Another study of “service integration,” this one for the Annie E. Casey Foundation and the Rockefeller Institute of Government, looked at 60 promising sites around the country. Mark Ragan, study investigator, concludes, “Most of the local authorities who might lead the effort at integration have full-time jobs already. Chances are they are already overloaded, especially with recent budget cuts and caseload increases. Where it's happened, it's happened because a visionary local leader pushed and pushed and pushed.”

Apart from these prosaic challenges, there are key institutional barriers to a streamlined system. A big one is the fragmentation of federal funding streams, each with its own rules and mandates. A father who qualifies for skills training under the Workforce Investment Act, for example, might be ineligible to see a job counselor in the state welfare system. A mother who receives welfare-to-work funds to buy a used car might then flunk a state asset test for Medicaid.

A second problem is turf battles among state and local authorities. In many states, employment-service directors have resisted merging with welfare agencies, arguing that their constituency is employers, not poor families, and that their mandate is economic development, not poverty reduction.

Once upon a time, segregating the welfare poor from other workers might have made sense. Although there were various welfare-to-work experiments under Presidents Jimmy Carter and Ronald Reagan, the system by and large rewarded welfare parents for staying home and raising children. But the welfare law of 1996 erased that distinction and decreed that essentially all adults must work. It also raised the stakes hugely for anyone struggling at the low end of the labor market. Now, a mother who loses her job because of a sick child or a violent spouse can also lose cash assistance and other benefits. And virtually all adults on welfare lose all federal cash assistance after five years, even if they're not earning enough money to support a family.

Congress has two natural vehicles to improve the work support system: Temporary Assistance for Needy Families, the nation's main welfare program, and the Workforce Investment Act. Both are long overdue for reauthorization. Lawmakers could give the two programs a set of common goals, preferably goals that emphasize job retention and advancement, so that a state using one program doesn't run afoul of the other. They could also offer grants and seed money for service integration; retraining caseworkers and reprogramming computers is expensive, especially given the states' current fiscal crunch.

Beyond these administrative steps, Congress could extend the reach of federal work supports such as public-health insurance and child-care subsidies. It could launch a new round of Medicaid expansion; the nation still has nearly 44 million uninsured people, most of them in working families. The state-federal system of unemployment insurance also needs an overhaul because many of the working poor never qualify for benefits. Unemployment insurance was designed for an economy of full-time, full-year factory workers. Today, in an economy where temporary and part-time work is common, it covers less than 40 percent of the unemployed.

The 1996 welfare law had an unspoken and powerful premise: that work could replace welfare and give families a better path out of poverty. Many people, through confidence in the marketplace or sheer inattention, accepted that premise as true. But today, some 9 million Americans live in poverty despite working, and millions more hold jobs that keep them just above the poverty line. It might turn out that requiring work was the easiest -- and only the first -- phase in a new war on poverty.

David Hage is an editorial writer at the Star Tribune in Minneapolis and author of Reforming Welfare by Rewarding Work, published this spring by the University of Minnesota Press.

About the Author

David Hage is an editorial writer for the Minneapolis Star
Tribune. He is the author of the book Reforming Welfare by Rewarding Work.